Insurance basics: 5 things you should know about insurance

Who among us does not want to be assured in his life and guarantee financial security? Getting insurance will help ensure you have a financial plan for your life. Despite all of this, many of us do not think about the risks that may occur after insurance. Yes, it may be unexpected, as it will appear suddenly in any case. This is all clear to mention that we do not know insurance, as it is not an easy thing because of the many complications in it.
So we divided some things into the minimum. What follows is Insurance 101. Here are the top five basic things you should know about insurance:
First of all, what is insurance?
• Insurance is a method that helps us reduce the financial losses that we may suffer.
• This insurance combines the insured with an insurance company in a contract under which the insured is paid for certain losses. The insurance provider pools customer risk to make inexpensive payments to the insured (Investopedia).
• This insurance is the tool that will protect you and help you cover the costs of unforeseen events such as theft, illness, property damage, etc.
• It is the coverage you will get for a limited period or the rest of your life.
To obtain the required protection, you must pay a premium. These premiums are the amount that is paid from time to time, and of course, it will depend on the type of insurance you have and what is mentioned in your policy. The amount of premiums you pay depends on the extent of the losses that you may suffer. The most important points that are taken into consideration in computing premiums might be the health of the insured, his age, in addition to his lifestyle or family history.
Regarding health and auto insurance policies as well as dental and home insurance etc., the premiums also depend on the deductible amount. It is exactly the amount that you ask for and agrees to pay before the insurance company pays the rest. If you choose a higher deductible, it will reduce your premiums because you have agreed to pay a greater portion of your loss.

 How does insurance work?

It is well known that when people buy insurance, their money is placed with other people in a group. A percentage of this sum of money is used to help policy-holders who are in hardship during this period. Perhaps this difficult period is due to losses in the home, cars, or business. That is why only losses written in your contract are covered, not for things not mentioned.

A claim is submitted on the occurrence of a loss which is considered as a formal request to the insurance company to pay the covered loss compensation. The insured can also assign an agent to help claim benefits. Supporting evidence will be required and this depends on the type of loss (for example, photos of property damage for an accident or property insurance, or even a death certificate for a life insurance claim) during the processing or investigation of these claims.

Various types of insurance

Life insurance

This type of insurance is the payment for the family of the insured and his loved ones after the death of the insured to benefit his family. Where the insured nominates the people he wants to benefit (meaning the beneficiaries) and they are the ones who will receive the death benefits that may have been previously mentioned in the policy. Two cases are exempt from taxation (revenue or death benefit).

Life insurance has two types:
1. Term  in this type the coverage is only for a period specified in the policy. If the insured dies and has paid the premiums during the coverage period, that is, the insured will benefit from the death benefit as mentioned in the policy. It is known that this coverage will expire in a predetermined period that must be renewed. However, these premiums may increase because they are dependent on the age of the insured.
2. Permanent – here the insured is covered for his life (this is if he is committed to paying the installments on time without delay). There are two types:
Full life insurance – in which the insured is guaranteed that his premiums will not change despite age. This type of permanent insurance guarantees the insured the amount of death compensation as well as a guaranteed minimum cash value.
Universal life insurance – type achieves two goals as it combines life insurance and investment.

Health insurance
Health insurance has several benefits as it will help you pay for various services that are not covered by the regional health care plan. And another thing is that some species can supplement your income if you have a serious injury or suffer from a serious illness. As for the other types, they help pay for medical expenses if you fall ill during your vacation.

These are the types of health insurance:

• Disability insurance
• Critical illness or trauma insurance
Supplementary health insurance
Property and accident insurance (general)
Travel medical insurance
Long term care insurance
This insurance helps you cover the losses and damages you suffered in your home, car, personal property, or even your business. Insurance guarantees protection against accidents to which the insured are exposed from legal liability for losses due to injury to other people or even damage to their property.

some types of general insurance:
• Liability insurance
• Auto insurance
• Business insurance
• Collision insurance
• Home or Property insurance
• Public liability insurance
• Errors and omissions insurance
• Commercial property insurance
• Tenant or Renter’s insurance
• accident benefits/bodily injury insurance
• Comprehensive insurance

Insurance group

This type of group insurance offers an advantage for employers to offer (employees) this benefit which is an employee’s total compensation package. Benefits programs offered by the government (Benefits are offered as part of one group. There are places to work in Canada that provide several additional benefits to employees, showing the well-being of their employees at work to ensure a healthier workforce. As for the costs paid in the group insurance program, they are considered expenses. Tax-free.
Among the most important benefits provided by group insurance that is widely offered in Canada are basic life insurance, dental insurance, and supplementary health insurance, and we cannot forget to mention long-term disability insurance, and finally, insurance against death due to accidents and the cause of cutting organs.

Where do your premiums go?

What insurance companies do is they set premiums to pay for claims, operating expenses, and investments as well. As they practice financial management by paying claims, for example, they invest in low-risk investments, this last one that you can easily liquidate in case you need to pay claims. It is worth noting that they allocate funds as a legal reserve. They are obligated by law to keep this amount. This legal reserve guarantees the insured that they benefit from the insurance company that can pay a large number of claims in a short period, as in the event of disasters.

To get insurance
Insurance companies assess whether they can emanate a policy based on specific criteria such as:
• Medical history
• Previous claims made
• Quantity of coverage you are requesting

Many types of insurance require a medical examination, and this applies to life insurance. Then the insurance company reviews the request by searching your personal and medical records to assess the risks. After this evaluation, you will know the amount of coverage that will match your qualifications and also the premiums that you will have to pay.
You must answer all questions in the application truthfully and this applies to all types of insurance. If you avoided mentioning important information or lied in the request, this will be a primary reason for canceling your document, or worse, preventing you from claiming in the future.

Definition of terms:
The policy – it is a legal contract between the insurance company and the insured, explaining to you in details the most important risks that it will cover, as well as the circumstances in which the insurance company will pay you for your loss, and the amount of money that you will get if you submit the claim.
Policyholder – the insured or concerned with the policy.
Coverage – how much protection you require. It is also the maximum amount that your insurance company will pay you if you claim compensation for the loss. In particular, the coverage will be provided for your policy.
Benefit – Your insurance company pays you a sum if the insurance company accepts your claim.
Insurance Premium – It’s The amount you pay for insurance companies .
Monetary value – it is the amount that the insured will pay to the policyholder if the life insurance policy is canceled. It can be added to the death benefit and can be paid upon the death of the insured. This term is used frequently with life insurance policies.
Death Allowance – This is the amount that the insured will pay the beneficiary upon the death of the insured.
Claim – this is the notification the insured makes at the insurance company until payment is made for the loss, by being covered by your insurance policy.
Beneficiary – This is the person who carries the name of the insured or designates him to receive the policy proceeds. It can be changed at any time without notifying what is irrevocable. But it cannot be changed without the written permission of the recipient.
Deductible – before the insurance company pays the remainder, the insurer pays an amount. This is the deduction.

Exclusions – these are some of the things your insurance policy does not cover. For example, some health insurance policies may eliminate medical conditions you had before applying for insurance. The travel insurance policy can also reject some claims if you are going to travel to a dangerous country. It is important to read your document carefully to verify what you will cover and whatnot so that you are not surprised when you claim compensation.

Risk – the possibility of an insured event occurring, such as loss, death, or injury while the policy is valid.

Rider – is an addition to your insurance policy to give you complete protection. Although it has an additional cost, it does include coverage for risks that the primary policy may not cover.

Term or Duration – the period your policy covers.

Sources: Module 6: Insurance, Understanding insurance basics, Financial Consumer Agency of Canada; Insurance Bureau of Canada; Financial Consumer Agency of Canada; Insurance Bureau of Canada, and Insurance